Business, 14.07.2020 23:01, hannahkelly1629
Tanner-UNF Corporation acquired as a long-term investment $200 million of 7% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 9% for bonds of similar risk and maturity. Tanner-UNF paid $160 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management is holding the bonds in its trading portfolio. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $170 million.
Required:
1. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate.
2. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet.
3. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $150 million. Prepare the journal entries to record the sale.
Answers: 3
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Tanner-UNF Corporation acquired as a long-term investment $200 million of 7% bonds, dated July 1, on...
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